Category Archives: Tax Policy and Tax Strategies

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“In a now-deleted tweet, which has nonetheless already become notorious, Paul Ryan tried to hype the benefits of his massive corporate tax cut by celebrating the example of a worker who’s getting $1.50 more per week. That’s roughly the price of a small French fries at McDonald’s.

Should we keep giving Ryan grief over that tweet? Yes, we should – and not just because it shows how out of touch he is. By highlighting the tiny tax cut some workers will get as if that were the point and main result of a bill that blows up the deficit by more than $1 trillion, he helps illustrate the bait-and-switch at the core of the whole G.O.P. agenda.

For tax cuts aren’t free. Sooner or later, the federal government has to pay its way. Even if you don’t think the budget deficit is currently a big problem, except under very special circumstances anything that reduces revenue will eventually have to be offset by later tax increases or spending cuts.”

“Can online retailers be compelled by law to collect a sales tax? According to the Supreme Court, no — but that could change if, in the next few weeks, it decides to take up a case challenging the current rule.The court should reconsider the prohibition, because the law takes a hammer to the fiscal health of states, which lose out on millions, if not billions, of dollars in sales tax revenue. Staggering amounts of digital transactions occurred this year: an estimated $6.59 billion in digital transactions on Cyber Monday (which would be a record), and an estimated $100 billion for the holiday season.Customers may be confused: Some online retailers do collect sales taxes, at least sometimes. Amazon, for example, collects them on Amazon transactions, but not on third-party-vendor transactions sold through Amazon.”

DL: Yes, yes, yes. It is crazy not to make all on line retailers pay sales tax, since they are gutting our retail stores where we work and live.

Here is a good comment I endorsed:
Joe Sparks Rockville, MD 14 hours ago
I agree that online retailers should be required to collect sales taxes.

I also think sales taxes should be abolished because they are regressive. Instead of having a bunch of taxes, sales, income, tolls, etc., I would only have progressive income taxes. (Loopholes would need to be eliminated.) These taxes would be based only on amount of income, not source of income. That means dividends, wages, capital gains, etc. would all be taxed the same. Unfair differences, such as carried interest would be eliminated. This would make the tax code simpler, better, and fairer.

“Republicans are on the verge of achieving their decades-long goal: an overhaul of the tax code. But the system they have built will not last.The plan’s instability is partly a result of the process Republican Party leaders chose to make it happen. Reconciliation, which allows escape from the Senate filibuster, means that Republicans did not have to reach across the aisle. Not a single Democrat supported the legislation.

This choice has consequences. For one, the exclusion of Democrats means that there is no buy-in from the minority party that will one day, perhaps soon, be in the majority again. This dynamic is worsened by the fact that the tax legislation pits blue states against red through the limitation of the state and local tax deductions. In the end, Republicans have chosen policies that are more extreme than they would have if they had worked with Democrats.”

DL: Well done. Here are the top comments which I endorse:

mancuroc is a trusted commenter rochester 12 hours ago

“Republicans are on the verge of achieving their decades-long goal: an overhaul of the tax code.”

Yes it is a decades-long goal. No it isn’t an overhaul – it’s a heist that moves massive amounts of wealth to the top.

Reply 376 Recommended

ChristineMcM is a trusted commenter Massachusetts 10 hours ago

“These policies not only face the risk of being undone by a future Democratic majority, but also could indeed prove to be so lopsided as to alienate the more centrist of Republicans. Worse, Republicans now aim to take advantage of the instability they’ve created by cutting so-called entitlements like Medicare down the line, burdening the poor and the middle class.”

Actually, they kick the middle and lower classes three ways: first by raising taxes on those who might have itemized deductions in high tax states; second, making them pay the penalty for fixing deficits the GOP created in the first place; and third, making sure their “cuts” such as they are are temporary.

Once the understaffed, underfunded IRS sets these 1000 pages into rules and regulations, I believe they’ll find a ton of stuff that sets off unintended consequences.

By then of course, Democrats may take back the house and face the dirty job of fixing the GOP’s messes (which they always do).

But now, at least, Republicans can’t call Democrats the “tax and spend” party. No, the real truth is more like the “clean up party, ” fixing the messes created by the “Cut and spend” Republicans, who are gambling that the Dems will be blamed once the economy tanks.

It might be hard to prove given how this unilateral bill was rammed through without Democrat participation or votes.

And if Congress thinks all will be fogotten, I can assure them, we won’t let the public forget.

Reply 346 Recommended

Bruce Rozenblit is a trusted commenter Kansas City, MO 11 hours ago

The line being touted by the Republicans is that the temporary nature of the individual tax cuts exists only because of the rules of reconciliation. They are laying the groundwork for blaming the tax cut expiration on the Democrats if they don’t make them permanent next year.

How stupid do they think we are? If these cuts are made permanent, then the deficit will be much larger than the forecasted 1.5 trillion. Why don’t they increase the corporate rates in 2025 and then make the individual rates permanent? By then, if their supply side magic works, corporations will be so wealthy, they can afford to pay more in taxes. The public will have financed their growth with debt and deserves to be paid back.

But no. The deficit most likely explode under this bill. It will be much higher than forecast. That is because of the many new loopholes they opened up that are yet to be fully exploited. Give the accountants six months to launch their plans.

They also keep saying that the increased profits will be reinvested which will grow businesses. Here we go again. It is demand that grows business, not supply. Investments are always made in response to demand. All the GOP did was to dramatically boost profits with the stroke of a pen. You don’t make more widgets if you can’t sell them. If you make more money on the widgets you sell, you stick the money in your pocket.

This is going to blow up. The Democrats should prepare to assess blame on where it belongs, the GOP.

JBC

The tax revenue lost by the 7% difference between 21 and 28 is sizeable, and Obama never would have placed the impact of any corporate tax cut on the backs of the middle class and those with even lower incomes. Do not act like this is no big deal Mr. Brooks. It is.

698 Recommend

David Lindsay Jr.

Hamden, CTPending Approval

Bravo David Brooks. Keep writing, and don’t let the detractors get you down. I’m disappointed that 698 commenters endorsed JBC. The problem with the JBC critique is that Brooks is just right that the world is going towards a 20% or lower corporate tax. But progressive, steep income taxes, and vat taxes, make up the difference, so that other developed countries have plenty to spend on social services for the middle and lower classes. We also spend more on military than these other counties, and fight in poorly thought out wars, which are wasteful. The problem with the GOP tax bill is not the 20% corporate rate, but almost all of the rest of it. They were supposed to get rid of all the loopholes, so that corporations would have to pay 20%. David is the author of “The Tay Son Rebellion, Historical Fiction of Eighteenth-Century Vietnam”, and blogs at TheTaysonRebellion.com.

“Unless something drastic happens, this will be the week Republicans ram through a tax cut that adds more than a trillion dollars to federal debt while undermining health care for millions. They will do so by violating all previous norms for major legislation, having held not a single hearing and rushed to a vote before the new senator from Alabama could be seated.The question is, why are they doing this? For this bill isn’t just a policy crime; it also seems to be a political mistake. It will, however, be good, one way or another, for the bank accounts of quite a few Republican members of Congress. Is that why it will pass?

About the politics: Normally, politicians willing to add a trillion dollars to the debt can hand out enough goodies to make their plans popular, at least for a while. The George W. Bush tax cuts heavily favored the rich over the middle class, but they contained enough clear middle-class tax cuts to have broad public approval, at least at first.This bill, however, faces heavy disapproval. Ordinary voters may not be able to parse all the details, but they have figured out that this bill is a giveaway to corporations and the wealthy that will end up hurting most families. This negative view isn’t likely to change.”

“To understand the cynicism and mendacity underlying the Republican tax bill, look no further than a provision that would benefit President Trump and other property tycoons that is in the final legislation Congress is expected to vote on this week.

The provision would allow people who make money from real estate to take a 20 percent deduction on income they earn through limited liability companies, partnerships and other so-called pass-through entities that do not pay the corporate tax. The beneficiaries would also include members of Congress like Senator Bob Corker, who last week decided he would vote for the bill even though Republican leaders did nothing to address his concerns about an exploding federal deficit.

The biggest winners would be people like Mr. Trump, his family and similarly advantaged developers who make tens or hundreds of millions of dollars every year on swanky office towers and luxurious apartment buildings. An earlier version of the bill passed by the Senate provided a 23 percent deduction but put limits on its use that would prevent wealthy developers from profiting from it. The House version would simply have reduced the rate at which pass-through income is taxed.”

“The Republican tax bill is an audacious attempt to accelerate the economic trends of the last half-century.If you’re a fan of these trends — rapidly rising inequality and stagnant middle-class incomes — you should love the bill. If you’re not a fan, you can at least take comfort in knowing that you’re in the majority of Americans, as polls consistently show.

Over the last few decades, the rich have not only enjoyed the largest pre-tax raises, by far. They have also received big tax cuts. The middle class and poor, meanwhile, have suffered from slow-growing incomes — and from overall tax rates that are higher today than in the mid-1960s.The first part of that story is widely known. The rich have gotten richer, for a whole variety of reasons.”

DL: Great piece. It looks like this tax plan will help progressive environmentalist and their friends on the left, to take over congress in the next, or next couple of elections.

And exellent comments, such as:

Ron Cohen

Contempt for the poor and middle class starts with Republican donors, the very rich. Why do the rich care so much? After all the tax cuts are modest relative to their immense wealth. Is it really about money? Or is it something deeper, more visceral, a need to dominate and impoverish everyone else?

The great English historian, R.H. Tawney, in his magisterial work, “Religion and the Rise of Capitalism” (1926), tells us that by the mid 1600’s, most English Puritans saw in poverty “not a misfortune to be pitied and relieved, but a moral failing to be condemned, and in riches, not an object of suspicion … but the blessing which rewards the triumph of energy and will.”

This ideal of individual morality, derived from Calvin, has been with us ever since. But it has surfaced with renewed zeal in our time, with men like the Koch bothers, Robert Mercer, Art Pope and Sheldon Adelson determined to spend whatever it takes to replace democracy as we know it—a leveling force—with a fascistic, plutocratic model of government.

For these billionaires, however, religion is not the motivator. Rather, it’s how they see themselves, their self image, that drives their lust for power, their need to dominate. They are the “makers,” deserving, while the rest of us are “takers,” undeserving and cadging off their efforts. Identity politics isn’t just for Democrats anymore.

Ed Schwab

One way to deal with the problems of Social Security and the high payroll taxes is by recycling taxes that many Social Security recipients pay on their benefits. AS you may know, many social security beneficiaries pay no taxes on their benefits. However, there are many like me who pay quite a bit. My wife and I pay about $7,000 a year.

SS benefits are taxed only when recipients receive more in retirement income from other sources than they receive in SS benefits. Taxes are paid under a complex formula from 0% to 80% depending on how SS income compares to other retirement income. My pension income is about 20 times my SS benefit. That means I and my wife pay income taxes on 80% (the max percentage) on our SS benefits.

I don’t mind paying that amount, but I object to where it goes. It goes into the general fund just like other taxes. It seems to me that the better way would be to recycle it into social security. There are millions of us who pay taxes on our social security. The problems of the fund would be relieved a lot if our taxes went back to social security rather than into the general fund. When my wife and I pay back almost 20% of what we get to the government, it seems like that money should go to replenish the SS fund.

253 Recommend

NYT Pick

MC

This tax bill for the rich is so appalling. Not only have payroll taxes not been addressed, but also every person will lose the personal exemption of $4,100 for themselves and for every member in their household.

It doesn’t matter that the standard deduction has doubled to $24,000 because if you are a family of three, you lose $12,300 in person exemptions. Therefore, doubling the standard deduction is a wash. But, if you’re a family of four or more, chances are very good you will pay more in taxes.

Why hasn’t the media explained to the public this MAJOR lose of the personal exemption of $4,100 per person? This vital fact has been ignored. Most middle class people will gain nothing. In fact, most of us will pay more. And every additional dollar we pay will go in the pockets of the 1%.

“If anyone still believed that the Republican Party had become a party of economic populism, the tax bill that the party is set to pass in Congress will burst their bubble. This bill raises taxes on the poor and cuts taxes on the rich. Most of the American people disapprove.

Senate Republicans negotiated in secret at top speed, and then passed the bill at 1:50 a.m. on a Saturday, as if to minimize public scrutiny. The original American populists were the men and women of the Populist Party who demanded open government and income taxes on the rich; this tax bill is exactly the sort of thing that made them howl in outrage.But the Republican tax strategy has roots in the American populist tradition, too. That strategy is to disregard experts and rile up the base with tax policy arguments that would not survive professional scrutiny.

Populists did this on behalf of the poor. But the man who first put this strategy to work for rich people was Andrew Mellon, the millionaire who became secretary of the Treasury after World War I. Poor veterans of the war were clamoring for expensive public benefits. Rich men wanted their income taxes rolled back.Mellon squared the circle by inventing a supply-side argument: Cutting income tax rates would actually increase tax revenues. In particular, he said, cutting the top income tax rates would encourage rich people to pull their money out of tax shelters and invest in creating jobs. Or, as Treasury Secretary Steven Mnuchin has said of the current Republican tax plan, cutting income taxes “will pay for itself with growth.” “

” “The American people have waited 31 long years to see our broken tax code overhauled,” the leaders of the Koch’s political network insisted in a letter to members of Congress on Monday, urging swift approval of final legislation. They added that the time had come to put “more money in the pockets of American families.”

The problem, as Republicans are learning, is that most Americans do not believe that is what the tax plan will do.

Steve Schmidt, a Republican strategist, said that amid all the talk about the need to score an important victory for their party, “it bears mentioning that the ‘win’ is something that is extraordinarily unpopular with 75 percent of the American people.” ”

David Linday: Republicans in red states, call your congressmen and women, and stop this tax bill from impoverishing the middle class, to make the top 5% even more wealthy.

Tax reform could be a great morvement for the majority of Americans, if it were bi-partisan, and carefully crafted with hearings and external reviews.

David Lindsay Jr is the author of The Tay Son Rebellion, and blogs at TheTaysonRebllion.com, and InconvenientNews.wordpress.com

“After a frenzy of congressional action to rewrite the tax code, salesclerks and chief executives are calculating their gains. Business was treated with the everyone’s-a-winner approach that ensures no summer camper goes home without a trophy.Some got special prizes. Cruise lines, craft beer and wine producers (even foreign ones), car dealers, private equity, and oil and gas pipeline managers did particularly well. And perhaps the biggest winner is the industry where President Trump and his son-in-law, Jared Kushner, made their millions: commercial real estate.

House and Senate Republicans, in their divergent bills, both offered steeply reduced rates to corporate giants, partnerships and family-owned firms across the board. But when it came time to eliminate special breaks or impose tighter standards, real estate was generally excused from the room.

Most businesses were hit with new limits on deductions for interest payments, but not real estate. Most industries lost the ability to defer taxes on the exchange of similar kinds of property, but not real estate. Domestic manufacturers and pharmaceutical companies lost some industry-specific breaks, like the tax credit for so-called orphan drugs, in exchange for lower rates.”

Let me vomit. Here are the current two top comments, I approve:
Elizabeth Cincinnati 2 hours ago
Under current IRS tax code, all real estate investments are considered passive investment and treated as ordinary income, and income received from REITS are tax at the ordinary tax rate. Under the current tax proposal, small real estate investors ( those small landlords) still face the new constraints on borrowing, but not the large commercial real estate investors like Trump, the hedge funds.
Congress should just restore mortgage interest, SALT and property tax deduction for the masses with limitation imposed by AMT, and eliminate the special treatment for commercial real estates and REITS as a way to off set revenue reduction. After all, why should the Trumps of the World get a special break when the rest of us do not.

Reply 32 Recommended

Marie Boston 2 hours ago
When will the rank and file Trump supporters admit, at least to themselves, that when Trump said “we” he didn’t mean them, and when Trump said he’s going to make America great again he meant for him, not them?

Everything that Trump has done has been done for elites like him and for corporations, nothing for us. And worse, it’s not as if he is ignoring or neglecting the people, Trump and his party are actually taking directly aim directly at and are taking from them. While some of the rank and file may applaud the ideas of less regulation and a pro-business stance in principle as practiced it is coming directly from their hide in terms of less money, less opportunities, and more harm.

1. A tax plan absolutely skewed to the corporations and wealthy, and more specifically his corporations and his wealthy family.
2. A plan that also eliminates the breaks on education that the Republican elite tell the rank and file they need for a better paying job rather than raising the minimum wage. And speaking of the minimum wage…..
3. Eliminating regulations the protect people from physical and financial harm
4. Eliminating the ability to use class actions pitting corporate giants against the little guy in court or arbitration boards paid for by the corporations
5. Turning over land that was intended for all so that a few can profit
6. Eliminating opportunities for reasonably priced decent health care
7. Social Security and Medicare on the chopping block